The government has currently set a vision to make India a gas-based economy. The purpose is to enhance the share of gas in the power mix from the existing 6 per cent to 15 per cent in 2030. We have currently witnessed a developing demand for organic gas owing to greater availability at affordable rates, its attribute of becoming a cleaner fuel, and of course improvement in provide and distribution infrastructure more than the years.
This has enhanced the criticality of indigenous gas markets to give the essential push to the whole ecosystem by boosting each, domestic production and consumption. In reality, India has lately forayed into gas markets, even so, the country’s ambition to create gas markets towards developing a gas-based economy will will need more elaborate policy reforms. This would imply bringing in reforms such as adopting more industry-based mechanism for the discovery of APM gas rates by means of gas-to-gas competitors inside India, bringing the fuel beneath a nationwide tax, developing a Transmission and System Operator, unbundling of advertising and transmission, and so on.
There are various learnings from other mature gas markets that are keeping a significant share of gas in their power mix. In markets like the US and Europe, gas trading hubs have been pivotal in the expansion of gas business. Globally, Henry Hub of US and Europe’s National Balancing Point (NBP) and Title Transfer Facility (TTF) are regarded benchmark hubs for figuring out gas pricing. There have been some elements that have considerably contributed to the results of the respective gas markets that incorporate open access to infrastructure, program operator, industry-friendly transport access and tariff amongst other individuals.
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Building India’s nascent gas industry
India has now its personal gas exchange, acting as a nationwide, automated trading platform to trade in a delivery-based spot as nicely as forward contracts and enabling competitive indigenous benchmark gas rates. As of now, only free of charge industry or non-APM domestic gas and Regasified Liquefied Natural Gas (RLNG) are permitted to be traded on the exchange.
As India moves towards the path of growing the share of gas in its power basket, gas markets will be a catalyst towards this shift. It will provide competitive and transparent pricing, flexibility in procurement coupled with payment safety. In reality, pricing determined by the industry will lead to higher industrial development and strengthen India’s financial competitiveness.
India has currently created some progress in addressing the gaps at each the infrastructure and policy level necessary to create the gas markets. We are currently witnessing a powerful concentrate on the expansion of the gas pipeline framework in the nation. The PNGRB’s current regulation on uniform transmission tariff and gas exchange regulation, are in the ideal path. Further, the PNGRB has also notified access codes for new city gas distributors. This would enable city gas distribution organizations to transport, distribute and cost organic gas in new cities. This is most likely to enhance gas consumption, thereby, stimulating demand for competitively priced gas which, in turn, increases the significance of gas markets.
However, there is a will need for additional essential enablers to develop productive gas markets. These enablers are important as they enable make sure higher competitors, superior utilisation of pipeline infrastructure, and reduce fees for finish prospects. As a nation, we nonetheless have some ground to cover in this path but there are more alterations on the horizon for the business.
Read Part 2 of this short article: What’s relevance of independent program operators, rational transportation tariffs in developing gas markets
Rajesh K Mediratta is the Director at Indian Gas Exchange and Director at Strategy & regulatory Affairs, Indian Energy Exchange. Views expressed are the author’s personal.